Its Not That Special: U.S. Supreme Court Decides its First Investment Treaty Arbitration Case
By CHARLES A. PATRIZIA, JOSEPH R. PROFAIZER, IGOR V. TIMOFEYEV & DANIEL PRINCE
Expressly acknowledging its “importance … for international commercial arbitration,” on March 5, 2013, the U.S. Supreme Court issued a ruling in BG Group PLC v. Republic of Argentina, the Court’s first-ever case involving international investment treaty arbitration. Justice Breyer delivered the opinion of the Court, holding that, absent express contractual language to the contrary, federal courts must review with deference an arbitrator’s interpretation and application of treaty provisions concerning prerequisites to arbitration, where such provisions do not implicate the arbitration agreement’s validity or scope. Applying the interpretive presumptions developed in the context of private U.S. domestic arbitration to the United Kingdom-Argentina bilateral investment treaty at issue, the Court concluded that the treaty’s local court litigation requirement (demanding litigation in Argentine courts to a final decision or for 18-months, whichever occurred first) was “highly analogous” to procedural provisions reserved for arbitrators, not courts, to interpret and apply. Accordingly, the Supreme Court reversed the Court of Appeals’ decision to vacate BG Group’s US $185 million damages award. The Court’s decision is also notable for the justices’ extensive reliance on international arbitration commentary, including a treatise on investor-state arbitration co-authored by a late Paul Hastings partner, Christopher F. Dugan.